China looks to pave way for private investors in oil, gas and infrastructure projects

Telecom infrastructure and oil and gas extraction are some areas in China which may be open to private investors in the future. Getty Images photo by Andrew Wong.

Leery of worsening balance sheets, China wants to increase private investment

BEIJING, Aug 23 (Reuters) – China’s top economic planning agency said on Tuesday that it would take measures to ensure private investors can compete fairly with state firms in infrastructure projects, traditionally the domain of government-backed enterprises.

The government has sought ways to increase private investment in infrastructure projects, leery of worsening the balance sheets of already indebted state-owned enterprises and local governments.

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Big-ticket infrastructure projects have been a policy focus this year to help cushion a slowdown in the world’s second-biggest economy. But with private investment growth easing to the single digits, the state has had to do much heavy lifting. Government spending soared 13 percent in January-to-July from a year earlier.

A two-year-long effort to guide private capital into projects such as metro systems and hospitals via public-private partnerships (PPP) has generated little interest. China is working on a draft law to govern PPPs, which the government says have been deterred by imperfect and inadequate legislation.

“We have to create a clear and predictable market environment for private investment,” Hu Zucai, vice-director for the National Development and Reform Commission (NDRC), told a press conference on Tuesday.

He added that “innovative” forms of private investment such as PPPs should be encouraged if necessary.

Hu said the 165 key infrastructure projects specified in the government’s current five-year plan provide clear direction on how “social capital” – a phrase China uses for private investment – can enter each industry.

“I heard some private investors say they have the capital but are not sure where to invest in. I think the plan provides very clear guidance,” Hu said.

He said airports, telecom infrastructure and oil and gas extraction are areas that should be further opened to private investment.

So far, fewer than one-quarter of projects announced by the government as PPPs have found private investors, official data shows.

Investors had signed up for 619 of 2,531 projects with a total value of 1 trillion yuan ($150 billion) through the end of July, NDRC said on Tuesday.

In July, the cabinet said the government will implement reforms to attract more private investment into railway, petroleum, natural gas, power and telecommunications sectors, partly via PPPs.

To further lure investment, the cabinet on Monday said authorities plan to cut the annual tax burden for businesses by more than 500 billion yuan ($75 billion) within the next one to two years.

(Reporting by Yawen Chen and Elias Glenn; Additional writing by Ryan Woo; Editing by Richard Borsuk & Shri Navaratnam)